Demonstrate the benefit of a new stock control system

Reference no: EM131413701

Templar Manufacturing

James Templar founded his own manufacturing company when he was 21 years old. He has continued to run it for the past 35 years and through steady expansion it now employs over 200 people. A management consultant recently suggested improving the stock control system, but Mr Templar is not sure that this is necessary. He was talking to a meeting of managers and said, ‘I don't know how much the present stock control system costs, if it works as well as it could or if the proposals would save money. I do know that we have the things we need in stock and if we have a shortage then enough people complain to make sure that things get sorted out and we don't have problems again. What I want is someone to show me if the proposals are worth looking at.' The management consultant asked what kind of demonstration Mr Templar would like and was told, ‘I know you wanted to run a pilot scheme before starting work on a revised stock control system. I still need convincing that it is even worth going ahead with the pilot scheme. I don't want anything fancy. Let me give you an example of one of the components we make and see what you can do.' ‘This component is basically a flanged orbital hub which costs us about £15 to make. We use about 2,000 a year. At the moment we can make them at a rate of 70 a week, but plan only one batch every quarter. Each time we set up the production it costs £345 to change the production line and £85 for preparation and scheduling costs. Other stock holding costs are related to the unit costs including insurance (1% a year), deterioration and obsolescence (2%) and capital (13%). I think that we could make them a bit faster, say up to 90 a week, and the unit cost could even fall a few per cent. Of course, we could make them a bit slower, but this would raise the cost by a few per cent.'

Questions

1. If you were the management consultant, how would you demonstrate the benefit of a new stock control system to Mr Templar?

2. What information would you need for your demonstration?

Reference no: EM131413701

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